Japan warned Tuesday of "appropriate" action to counter excessive volatility in the currency market after the yen hit a 32-year low against the U.S. dollar amid jitters over further possible intervention and its impact on the economy.
Prime Minister Fumio Kishida said in parliament that the yen's rapid depreciation is "problematic" and the government will work with the Bank of Japan in taking appropriate steps. BOJ Governor Haruhiko Kuroda rejected an opposition lawmaker's demand that he step down over years of easing by the central bank that has weakened the yen but failed to achieve its inflation target.
The relentless fall of the yen has created a headache for the government. Kishida has thrown his support behind the BOJ's efforts to achieve its 2 percent inflation target with monetary easing, while seeking to alleviate the pain on Japanese households due to rising prices for imported energy and food amid the weaker yen.
"We don't comment on specific foreign exchange levels, but we will firmly take various steps against rapid movements," Kishida told a session of the lower house Budget Committee.
Japanese authorities have repeatedly issued verbal warnings in recent days, in a bid to prevent a sharp slide in the yen that would hurt the economy.
There is speculation that Japanese authorities may have conducted a "stealth" intervention in recent days, though Japanese officials have remained mum.
Analysts say the fundamental reason for the yen's weakness, or the dollar's relative strength against its major counterparts, has not changed as the U.S. Federal Reserve is expected to go ahead with more rate hikes to rein in surging inflation. The BOJ, for its part, looks set to remain the last major central bank to shift to a tighter policy.
"We expect the BOJ's monetary policy to take into consideration various factors. If foreign exchange rates move (excessively)...we will have to coordinate closely with the BOJ and consider appropriate steps," Kishida said.
The yen was trading mostly near the 149 line versus the dollar on Tuesday in Tokyo, after falling beyond that level. The currency has moved further away from 145.90, the level at which Japanese authorities intervened to prop it up on Sept. 22.
In the Diet session, Takeshi Shina, a lawmaker of the main opposition Constitutional Democratic Party of Japan, claimed the government and the BOJ were moving in opposite directions.
He said the government is seeking to stem the yen's fall while the central bank is accelerating its depreciation with monetary easing.
Kuroda said the dollar has been gaining strength against its major counterparts, not just the yen. "Few people expect this (dollar strength) to continue, at least among those I met in Washington," he said. The governor was in Washington last week for meetings related to the International Monetary Fund and the Group of 20.
"With respect to developments in the foreign exchange and commodity markets, there is extremely high uncertainty, including over their impact on prices," he said, adding the BOJ is closely watching the situation.
The BOJ expects Japan's core consumer inflation, which rose 2.8 percent in August, to fall below 2 percent in the next fiscal year, as it maintains ultralow rates against the global tide of monetary tightening.
The BOJ sees more robust wage growth as necessary to attain the inflation target in a stable and sustainable fashion, and Kishida has called for salary increases that at least keep pace with inflation.
But it appears unlikely that the 2 percent target will be achieved during Kuroda's term ending next April, according to BOJ projections.
"Your claim that our qualitative and quantitative easing has been an utter failure goes against the facts," Kuroda said in response to Shina. "I have no intention of stepping down."
